Smith Travel Lowers Forecast For U.S. Hotel Room Rates

Smith Travel Research has significantly lowered its expectations for U.S. hotel industry room rates and revenues, and the firm said moderate declines would continue through 2010.

Smith Travel Research now projects that average daily rate will drop by 9.7 percent in 2009, and revenue per available room will be down 17.1 percent year-over-year. In April, the firm had forecast a RevPAR drop of 9.8 percent and a rate drop of 3.6 percent. STR also said occupancy will drop 8.4 percent to 55.4 percent this year, slightly down from the rate of 56.5 percent it forecast in April.

In 2010, drops in all three metrics will continue, STR said. It forecasts that rates will drop 3.4 percent, occupancy will drop by 0.3 percent and RevPAR will be down 3.7 percent.

A rebound of group travel will be the key to the lodging industry's recovery, said Smith Travel Research president Mark Lomanno. Group business will have to return to about 90 percent to 95 percent of its levels prior to the downturn, which will in turn generate transient demand, before hotels once again gain any pricing leverage, he said.

"I don't know how long it will take to get back to the levels it was in 2006, 2007 and maybe the beginning of 2008," Lomanno said in a statement. "On an inflation-adjusted basis, it's probably going to be longer than six years before the rates get back to 2007 levels. Absent some other event, it looks like we're bouncing along the bottom."

Source: Business Travel News